Power

Private enterprise drives improvements in health, wealth and happiness all around the world. But when private entities metastasise to the point where, in the form of mega-corporations, they can routinely control, override or sidestep democratic processes, we have a very serious problem.

Corporations are in the business of maximizing profit and shareholder value. This is a principle some countries, like the UK, have clearly enshrined in law[1], but even where it is less clear, for example in the US[2], it is the unchallenged norm in practice. It is fair to say that none of the largest corporations behave as if anything comes close to rivaling the importance of the bottom line. Even the fashionable and much-trumpeted idea of Corporate Social Responsibility (CSR) is, in most cases, an afterthought or a PR exercise that barely impinges on core business.

There may be nothing inherently wrong with maximizing profit. It can fuel certain types of innovation and progress across whole societies, as well as provide welcome employment. But when we treat such financial measures as the only valid form of ‘progress’, and enshrine this in our systems of state and corporate governance, we foster the conditions we see all around us today, where nothing is allowed to challenge ever-increasing profitability. Not vast and growing inequality; endemic human suffering through poverty and conflict; or the disastrous degradation of our natural environment. In fact, each of these atrocities is, in practically all cases, fueled by large corporations’ single-minded pursuit of growth and profit.

When corporations are more economically powerful than most governments, it means we have ceded control of essential aspects the global economy, and much of the responsibility for a safe and sustainable future of the planet to a tiny number of people who have no popular mandate or oversight; who are required to neither accept nor attend to social or environmental responsibilities; who are governed by short term, niche interests; and who are therefore profoundly ill-suited to the awesome task of global governance.

A few facts paint a stark reality. Latest information from the World Bank shows that 111 of the top 175 economic entities in the world are corporations[3]. Furthermore, the concentration of power within the network of mega corporations has reached extreme levels. Cutting edge systems analysis conducted at the Swiss Federal Institute of Technology has determined that the tangled web of cross-corporation ownership masks the fact that there is a “super-entity” of just 147 companies at the centre. The authors of the study conclude that, “less than 1 per cent of the companies . . . control 40 per cent of the entire network.” And, what’s more, “Most [are] financial institutions.”[4]

This concentration of power in unaccountable hands is not only made possible but actively encouraged by important rules of the global political economy. Rules like those that allow corporations to spend unlimited amounts of money in elections[5]; or opt out of the social contract by using tax havens to hoard vast wealth[6]; or even exercise massive and special influence over the making of rules in the first place, as is the case currently with secretive but incredibly important trade deals like the Trans Pacific Partnership (TPP)[7].

There is a simple principle that, if applied, would restore balance: no entity should wield ultimate power if it is not meaningfully accountable to people. In practice, this means putting democratically elected governments back in the driving seat. It means trade deals like the TPP are subject to genuine democratic oversight; the tax haven system is dismantled so that no matter how big a corporation is, it pays its taxes like the rest of us; and corporations are never allowed to grow beyond a certain size.

These sorts of rules need to be fought for. It might seem a herculean task, but the alternative is to allow corporations to continue to assume power in ever more spheres of our lives. And as long as they prioritise their own profitability above all else, that will mean disaster for people and planet.

  1. http://www.accaglobal.com/content/dam/acca/global/PDF-technical/business-law/rr-125-001.pdf
  2. Although there is no primary legislation to this effect in the US, the Dodge vs. Ford Motor Company case (1919) (http://www.casebriefs.com/blog/law/corporations/corporations-keyed-to-klein/the-nature-of-the-corporation/dodge-v-ford-motor-co/ ) set a precedent that is often cited as effectively mandating company Directors to this effect. In recent years, this interpretation has been questioned, (e.g. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1013744 ). Regardless, the norm is persistent and ubiquitous.
  3. http://dstevenwhite.com/2012/08/11/the-top-175-global-economic-entities-2011/
  4. http://www.newscientist.com/article/mg21228354.500-revealed–the-capitalist-network-that-runs-the-world.html
  5. E.g. in the United States, where the now infamous Citizens United vs. FEC case (2010) decided in the Supreme Court opened the door for unlimited corporate spending on political messaging during elections (http://www.nytimes.com/2010/01/22/us/politics/22scotus.html?pagewanted=all&_r=0  )
  6. https://www.commondreams.org/view/2012/12/04-0
  7. If they get their way and continue to be allowed to negotiate this deal behind closed doors, corporations will be granted even more power over democratic institutions. http://www.theguardian.com/commentisfree/2013/nov/04/us-trade-deal-full-frontal-assault-on-democracy